The Supreme Court’s 2011 decision in AT&T Mobility LLC v. Concepcion upheld an arbitration clause requiring arbitration of claims individually, thereby effectively preventing class actions. While the consumer finance industry and other industries frequently invoked arbitration clauses in defending lawsuits before AT&T,  since that decision was published, industry has increasingly relied on such clauses to successfully defend against expensive class actions.

But on March 10, the Consumer Financial Protection Bureau (“the CFPB” or “Bureau”), the watchdog federal agency created by the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) to implement and enforce regulations on consumer financial products and services, released the results of a three-year study on arbitration agreements, and announced its finding that arbitration agreements were restricting consumer relief in disputes with financial service providers by limiting class actions. The announcement also signaled that arbitration clauses in agreements for consumer financial products and services other than home mortgages may be next on the Bureau’s regulatory agenda.

Dodd-Frank prohibited arbitration agreements in home mortgages and authorized the Bureau to regulate the use of arbitration clauses in other consumer financial products if it found by a study of such agreements that doing so would protect consumers and serve the public interest, and if findings in any proposed rule are consistent with the results of the Bureau’s study.

The 700-plus page study released March 10 analyzes the resolution of consumer disputes in arbitration and the courts dating back to 2010, focusing primarily on credit card and checking account products. Excluded from the study were cases involving investors, securities, brokerage accounts, or investor services, as were insurance cases unless an add-on to a consumer financial product such as title or credit card insurance was involved.

According to the report, arbitration clauses are found in the agreements of card issuers with 53 percent of the credit card market, and in checking account agreements of banks and credit unions representing 44 percent of insured deposits. Eighty- eight percent of mobile wireless providers who authorize third parties to charge consumers for services and cover over 99 percent of the market also have arbitration clauses in their customer agreements.

Most consumers were reportedly unaware of the fact that they were subject to arbitration clauses with their financial service providers, and a small minority understood that the clauses restricted their ability to sue in court. The study also found that arbitration clauses were invoked to block class actions against credit card issuers whose agreements contained arbitration clauses 65 percent of the time.

According to the study, class action settlements involving consumer finance markets totaled $2.7 billion (averaging $220 million per year) over the study period and the amounts paid did not take into account the potential value to consumers of class action settlements requiring companies to change behavior. By contrast, the study reported that the value in debt forbearance consumers reportedly recovered in arbitration cases was a mere $400,000. No evidence was found that companies that included arbitration clauses offered lower prices as a result of not being subject to class action lawsuits, the CFPB reported.

In conclusion, the Bureau stated that arbitration clauses “restrict consumer relief in disputes with financial companies by limiting class actions that provide millions of dollars in consumer redress each year” and that now that it has finished the study, it would consider “what next steps are appropriate.”

Having concluded that arbitration clauses chill consumer rights to compensation in consumer disputes with financial companies, the CFPB appears to have laid the groundwork for future regulation of the use of these clauses in the credit card, checking account, and other consumer financial markets which were the focus of the study.

A fact sheet on the report is available at:

The complete report is available at: